As firm clients demand more and more access to their registered representatives, member firms must do more to make sure that their brokers do not run afoul of the firm communication written supervisory procedures.  One firm recently failed that test, resulting in a FINRA fine and censure. 

In that matter, FINRA found that the member firm allowed representatives to use personal email for firm business, including client communication.  Making that matter worse, the firm was aware of the practice and allowed storage of email communications on personal computers, exposing those emails to alteration and deletion.

The first question you should have is where compliance was and supervision regarding the pre-approval of client communications was.  The firm did have such WSPs requiring pre-approval of client communications, but lacked access to the personal computers to perform this supervisory task.  FINRA took issue with this type of supervision; more like the lack of supervision. 

This case is the perfect of example of the question, why have WSPs if the firm is not going to enforce them.  Client communications represent a hotbed of issues for large to small firms.  Allowing representatives to use personal email for client communications is not one of the better decisions a firm can make. 

The key to supervision is to be able to supervise.  This firm, by allowing the use of personal email accounts without meaningful supervision, set itself up for failure and sanction. 

Some may say this firm was lucky because there was no client harm.  I recently tried a case where the representative used a personal email account and made some statements that could be considered admissions.  Since the representative ignored firm policy, she and the firm were exposed to liability. spying.jpg

When it comes to client communications, you need a robust email review policy.  By having such a program, you may be able to uncover the more problematic issue of unauthorized use of personal email accounts.  Either way, firms need to really focus on client communications to avoid FINRA enforcement and civil liability. *


* photo from